Homeowners with subprime mortgages are starting to sue their lenders, and the national number of cases filed so far is on pace to surpass the total number of cases filed during the savings and loan crisis of the early 1990's.

Subprime-related lawsuits increased by about two-thirds in the second half of 2007, from 97 to 181, said Jeff Nielsen, managing director of Navigant Consulting Inc., a Chicago-based business, financial and regulatory advisor.

"We are already observing a steady acceleration of continuing litigation activity into 2008," Nielsen said. "The course of regulatory investigations, the prospect of government intervention and marketplace variables may affect the volume of filings, but the explosion of cases in 2007 suggests a daunting forecast of what is still to come."

A Navigant spokesman did not have a specific number of cases filed to date in 2008, but said the volume appears to be consistent with the second half of 2007.

The bulk of lawsuits has been filed in states such as California, New York and Florida, where subprime lending and the real estate bubble inflicted the most damage. To date, only 10 percent of subprime-related lawsuits have been filed in the Midwest.

However, there is one case pending appeal and several other issues that bankers, mortgage lenders and others serving the financial services industry should keep an eye on, several area attorneys say.

A recent case involving Bryan and Susan Andrews, a Cedarburg couple, may open the doors for more lawsuits in Wisconsin, Illinois and Indiana, said Laura Gramling Perez, an attorney with Reinhart Boerner Van Deuren S.C. Perez also chairs the firm's securitized mortgage and loan fraud team.

The Andrews family has filed a federal civil suit against Chevy Chase Bank, a metro Washington, D.C.-based financial institution. The plaintiffs refinanced their home with an adjustable rate mortgage from Chevy Chase Bank, Perez said.

"They've made a Truth in Lending claim," she said. "They said that Chevy Chase bank led them to believe that the introductory rate would have last longer."

The couple seeks a rescinding of their mortgage, Perez said.

"What happens is that if you rescind a mortgage, the bank has to repay all fees and interest that you've paid them," she said. "And you have to repay the mortgage."

U.S. District Court Judge Lynn Adelman ruled in January 2007 that the bank had violated the Truth in Lending Act, a court document states. Chevy Chase Bank appealed, and the case has been sent to the 7th Circuit Court of Appeals in Chicago.

If the case is upheld, it may allow for subprime-related class action lawsuits against financial institutions, Perez said.

"What will happen if the (7th) circuit upholds (the case) is that within the circuit, plaintiffs can bring class actions for rescission under the Truth in Lending Act," she said. "Potentially, it's really powerful. It could lead to an increase in litigation here."

Andrews vs. Chevy Chase Bank isn't the only subprime-related matter that Wisconsin lenders, attorneys and mortgage brokers should keep their eyes upon, Perez said.

"I think we're going to see other litigation here as well," she said. "What you're seeing all over the country is banks that made these bad mortgage loans and sold them up the pipelines. They might be securitized or not. But when loans go bad, everyone starts suing everyone else. And the litigation that comes out of that potentially comes out in stages."

Randall Crocker, an attorney with von Briesen & Roper S.C., said there are several companies headquartered in the Milwaukee area that are having subprime-related problems. If those problems persist, one or more of those companies may pursue litigation, he said.

"MGIC (Investment Corp.) is a longtime Wisconsin company and a real leader in its industry," Crocker said. "They have a strong management team and a good business plan. They ... could be well perceived as a real victim. I see them as a victim in terms of representations that were made to them on some of their underlying loans, and they sold insurance based on what the product looked like. They have some things out there that they may well be in a situation where they could look at some options."

While subprime-related lawsuits could increase in Wisconsin, that growth is limited, both Perez and Crocker said.

"Even if there were some questionable or careless or fraudulent practices, we don't have borrowers getting into as much trouble," Perez said. "Because we've been more modest, even if we're seeing the same practices as elsewhere, people have been able to roll with the punches."

"We're not going to see the kind of litigation (in Wisconsin) that we're going to see where there has been the large amount of triple-digit appreciation," he said. "I think Wisconsin will not be in the same situation with the lenders situation (in other states). I think lenders have acted as they always have here and made decisions on the perceived value."

The acquisition of Ozaukee Bank and Merchants and Manufacturers Bancorp by Chicago-based Harris and BMO Financial Group was finalized Monday.
Harris paid $137.2 million for M&M Bancorp and $190 million for Ozaukee Bank, a Harris spokesperson said. The transactions were announced in 2007.
The acquisitions include M&M Bancorp's 35 full-service and 11 limited-service branches and Ozaukee Bank's six full-service and two limited-service locations. The Wisconsin banks eventually will be renamed under the Harris brand.
Harris is retaining all of the employees at both of the Wisconsin bank companies, and announced several roles for top-level executives with Ozaukee and M&M.
Jim Rothenbach, formerly president and chief executive officer of Ozaukee Bank, will serve as Harris regional president for the Wisconsin North Region, including the area just north of Milwaukee and farther north to Sheboygan Falls. His region will include the Ozaukee Bank branches, as well as the former Grafton State Bank and Wisconsin State Bank branches.
Mel Hahs, a community bank president at MMBC, was named regional president for the state region, covering the far west and far north branches, including the former Reedsburg Bank, Fortress Bank and Community Bank Financial branches.
Mike Murry, former MMBC chairman, and Mal Hepburn, former Ozaukee Bank chairman, will continue to chair Harris community boards and will provide ongoing advice and business development support as the banks are brought together.
Tom Bolger was previously named president of Harris Wisconsin. He also will oversee the banks in Milwaukee and the banks in the southern part of the metro region.
Amy Yuhn, a spokeswoman for Harris, said all of Ozaukee Bank and M&M Bancorp's employees, including executives, are being retained at this time. Titles and specific roles for some of those executives have not yet been determined, she said.

Name: Ronald D. Miller
Title: Managing Director
Company: Cleary Gull Inc.
City of Residence: Bayside, WI
Family: Wife (Susan); and three daughters Laura (13); Sara (11); and Rachel (8).
How does the market look to you? "Even thought the stock market has had a bumpy start in 2008, I expect middle market M&A to remain strong through at least the election."  
What are you working on now? "Our lead pipeline is at record levels. Personally, I am selling four companies and helping two companies raise growth capital."
What was the best deal you've been involved in? "The most interesting transaction was probably helping Weyco Group purchase substantially all of Florsheim Shoes. We helped Weyco negotiate the acquisition of the Florsheim business through a Section 363 bankruptcy and helped Weyco raise the $70 million of bank debt necessary to close the transaction. Weyco's stock has since more than tripled."
What was the funniest or most interesting moment of your career? "After waking up at 3:30 a.m., getting dressed in the dark and driving to Green Bay for an early breakfast, I realized that I was wearing two different dress shoes. I tried to hide that fact from my client, but at lunch, he leaned over to me and said, "Tough morning?"

Bernanke confirms contracting economy
Federal Reserve Chairman Ben Bernanke did not use the "R" word in his semiannual monetary report to Congress last week, but he confirmed that the economy is showing all of the signs of a recession nonetheless.
Bernanke expressed concerns about contracting gross domestic product, the icy housing market, rising inflation and rising unemployment.
"The economic situation has become distinctly less favorable since the time of our July report. Strains in financial markets, which first became evident late last summer, have persisted; and pressures on bank capital and the continued poor functioning of markets for securitized credit have led to tighter credit conditions for many households and businesses. The growth of real gross domestic product (GDP) held up well through the third quarter despite the financial turmoil, but it has since slowed sharply. Labor market conditions have similarly softened, as job creation has slowed and the unemployment rate - at 4.9 percent in January - has moved up somewhat," Bernanke said.
Bernanke noted that housing prices have "flattened or declined" in most markets. He acknowledged that the housing contraction has been "more severe" than he previously expected.
"As the housing market began to turn down, however, the slump in subprime mortgage originations, together with a more general tightening of credit conditions, has served to increase the severity of the downturn. Weaker house prices in turn have contributed to the deterioration in the performance of mortgage-related securities and reduced the availability of mortgage credit. The housing market is expected to continue to weigh on economic activity in coming quarters. Homebuilders, still faced with abnormally high inventories of unsold homes, are likely to cut the pace of their building activity further, which will subtract from overall growth and reduce employment in residential construction and closely related industries," Bernanke said.
Bernanke said rising energy costs have "eroded real incomes and wages," likely causing a slowdown in consumer spending.
"The business sector has also displayed signs of being affected by the difficulties in the housing and credit markets. Reflecting a downshift in the growth of final demand and tighter credit conditions for some firms, available indicators suggest that investment in equipment and software will be subdued during the first half of 2008. Likewise, after growing robustly through much of 2007, nonresidential construction is likely to decelerate sharply in coming quarters as business activity slows and funding becomes harder to obtain, especially for more speculative projects. On a more encouraging note, we see few signs of any serious imbalances in business inventories aside from the overhang of unsold homes. And, as a whole, the nonfinancial business sector remains in good financial condition, with strong profits, liquid balance sheets, and corporate leverage near historical lows," Bernanke said.
He hinted that the Fed may be inclined to consider additional interest rate cuts.
To read the full text of Bernanke's testimony today, visit 
http://www.federalreserve.gov/newsevents/testimony/bernanke20080227a.htm.

State bills would protect credit cards
Wisconsin credit unions are applauding state lawmakers for advancing through the State Legislature two companion bills, AB 745 and SB 439, which aim to keep safer the personal data stored on credit and debit cards.
The legislation, introduced by State Rep. Brett Davis (R-Oregon) and State Sen. Bob Wirch (D-Pleasant Prairie), captured 43 co-sponsors with strong bi-partisan support during its initial circulation period at the Capitol.
AB 745 passed last week through the Assembly Committee on Financial Institutions by a vote of 9-1 and is expected to pass through committee in the State Senate on Wednesday.
"This legislation is just common sense. It has no effect on the state budget, but enormous impact on every consumer in Wisconsin who uses plastic cards for purchases," said Brett Thompson, president and chief executive officer of The Wisconsin Credit Union League, the Pewaukee-based trade association for 260 not-for-profit, member-owned financial institutions.
Thompson said sensitive authentication data from credit and debit cards is often retained without cardholders' knowledge and lost by companies that, by the credit industry's existing standards, should not have collected and kept it in the first place. Hundreds of millions of records of consumer information have been lost over the last few years, costing consumers and businesses billions of dollars and countless hours to sort out, Thompson said.
The proposals advancing through the state legislature, however, would put the force of law behind industry standards dictating what information may be taken, transmitted and stored from a consumer's credit or debit card.
U\under the proposed law, merchants would be prohibited from retaining PINs or security codes after processing a credit or debit card transaction. If a merchant were to ignore the law and collect and keep that information and if the information were lost, the party responsible for that loss would be required to pay the costs to close consumers' accounts and re-issue cards. The party responsible for the loss would also be required to pay for steps that intend to prevent any ensuing fraudulent use of a consumer's personal information and cover certain costs enabling continued financial services to the card holder, such as notifying affected customers or crediting accounts for fraudulent transactions.
"Current law has allowed misbehavior related to payment card processing to go unchecked, and the result has been a tacit declaration of open season on consumers' private information," Thompson said.
Also supporting the proposals are the Community Bankers of Wisconsin, the Wisconsin Bankers Association, the Wisconsin Insurance Alliance, CUNA Mutual Group and the Wisconsin Federation of Co-ops.

Bill would put pressure on credit unions to serve low-income communities
Wisconsin credit unions would be required to document efforts to serve lower-income and minority consumers in the market areas they serve under a bill introduced in the legislature Thursday.
The proposed legislation (AB 897), introduced by Rep. Mark Gottlieb (R-Port Washington), is a reaction to reports critical of the credit union industry's commitments to serving lower-income populations, according to the Wisconsin Bankers Association (WBA).
In 2005, the National Community Reinvestment Coalition (NCRC) issued a report that called the credit union industry's service to lower income and minorities as "lackluster." The NCRC study concluded that credit unions "fail in their mission to serve people of modest means as they trail banks in making home loans to hard-working minorities, women and lower-income Americans."
In 2007, the WBA released a study that concluded that Wisconsin's largest credit unions are "trending away" from serving low- and moderate-income populations in favor of upper-income customers.
"This bill is not just about creating regulatory parity between competing financial institutions. It is about insuring that taxpayers and lower income consumers receive the social benefits they were promised in exchange for granting a multibillion dollar tax subsidy to an increasingly aggressive member of the financial sector," said Kurt Bauer, president and chief executive officer of the WBA.
AB 897 also formalizes a process to allow a state-chartered credit union to convert to a state-chartered mutual savings institution.

Marshall & Ilsley Corp. has promoted Gina Zielinski to vice president. Zielinski serves as a training delivery manager in M&I's human resources/M&I University-talent development department. She has been with M&I since 1980.

M&I Bank has promoted David Doran, commercial banker, to vice president. Doran has been with M&I since 2002.

Integrated Financial Solutions, LLC (IFS) is proud to announce the addition of four new employees to their financial planning firm. Mark Ziety has been hired as a Financial Services Assistant. Mark comes to IFS from Thrivent Financial for Lutherans where he gained experience for the last three years in financial planning. He is completing classes for the CFP(tm) certification and will sit for the exam later this year. Steve Barnekow recently joined IFS as Case Manager. He graduated in 2004 from UW La Crosse with a degree in Finance and a minor in Economics. Since graduation Steve has gained experience in the industry as an account manager for various financial companies. Kristoper Sharpe is another addition the Wealth Management department. Kris recently graduated from the University of Wisconsin-Green Bay in the spring of 2007 with a degree in Business Administration (emphasis in finance and a minor in accounting). He serves as a financial services assistant, supporting data entry for our clients' customized websites and managing documentation for implementation action plans.
Chanelle Pergande has been hired as our part time receptionist and administrative assistant. She graduated from Maranatha Baptist Bible College in Watertown, WI. Chanelle has experience in Service Management and Human Resources.

Ryan Stelzer, Peoples Bank Investment Center, and Jessica Berge, Peoples Bank Marketing Officer, have both been elected to serve on the volunteer-based advisory board of The Elkhorn Fund. The Elkhorn Fund is a locally directed endowment fund designed to fund community projects in Elkhorn that need help and often have little in terms of official government grants or outside support.

Community Bank & Trust has promoted Eric Hesselink to Commercial Lending Officer at the Sheboygan Falls location.

Park Bank has added Joyce Baldock as Vice President of Commercial Banking where she will be responsible for business development and commercial portfolio management.  Baldock is located at Park Bank's Brookfield office.  Joyce is a resident of Waukesha, Wisconsin.

SBT to present "The Next Stage" M&A Forum
Small Business Times will conduct an M&A Forum, titled "The Next Stage," on March 27, from 7:30 to 11 a.m. at The Pfister Hotel, 424 E. Wisconsin Ave.
Thousands of Wisconsin businesses are owned and managed by baby boomers who will soon be reaching the age of retirement. What then? What will be the "Next Stage" for their business?
The event will examine different exit strategies, including recapitalizations, employee stock ownership programs, management buyouts, sale to private equity firms, mergers with strategic partners and more.
The keynote speaker will be Mark Herndon, president of Dallas-based Parkwood Advisors LLC, a diversified professional services firm focused on M&A, investment banking and private equity investing. Herndon also is the co-author of "The Complete Guide to Mergers and Acquisitions: Process Tools to support M&A Integration at Every Level."
The event will include breakout sessions from 9:15 to 10 a.m. and from 10:15 to 11 a.m., presented by Emory & Co., The PrivateBank and Reinhart Boerner Van Deuren S.C., sponsors of the event.
The cost to attend is $95 per person or $760 for tables of eight and includes breakfast.
To register for the event, click here.

Financial Executives International Milwaukee Chapter meets on the second Tuesdays of the month at 5:30 p.m., University Club, 924 E. Wells St., Milwaukee. Call Mary at (414) 226-6975.